Property Development Finance

No matter their size, new construction projects and developments sometimes involve a significant upfront financial commitment that you might not be able to make or desire to make right away. Our industry expertise enables us to find the optimal finance option, enabling you to successfully complete your upcoming real estate development project.

Building construction, conversion, and extensive renovation can all be financed through property development financing. The loan is often set up as a temporary loan to cover solely the project’s construction costs.

The loan is often repaid when the project is completed by selling the property or refinancing into a residential or buy-to-let mortgage.

There is no distinction between the types of borrowing described by the words “development finance,” “property financing” and “property development loans.”

The need for new construction is growing, but high street banks’ typical lending programmes are declining. That’s where we come in. We can assist you in raising finance for your real estate development with access to 300+ funders in the lending market for various types of property.

The property development financing we offer will meet your unique demands thanks to our tailored approach. We strive for a quick turnaround so that you may get started on your project right away. The financial barriers will be removed whether you are building, renovating, or refurbishing a house.

The property development loans we set up are not just for seasoned real estate investors or business landlords; we are here for you even if this is your first construction venture. We may provide you with a free evaluation, personalised offers, and indicative terms.

Apply for property development finance

Request a call back

How does it work?

Fill in our form​

A member of the team will be in touch to collect some basic information. This helps us understand the type of funding that would best suit your business.

We find the best funding for you

We use the information you provided to source the best funding options for you and your business using our panel of over 250 lenders.

We present your options

We’ll then present you will all of the funding options available to you and give you time to decide which one you would like to proceed with.

What is property development finance?

Large-scale commercial, residential, and mixed-use property development can be facilitated with the help of property development finance, a type of business funding. It is a catch-all phrase that refers to several forms of development financing, such as mortgages and bridge loans.

For real estate developers, home builders, landlords, and others, there are several loan options available. It offers the necessary project capital, which is frequently essential to the success of a development initiative, and serves both the residential and commercial construction industries in the UK.

A wide range of construction projects can be financed through development finance, including but not limited to:

How does property development finance work?

Property development finance works to facilitate construction projects, helping to cover a large amount of the associated costs. As mentioned, property development finance is essentially a suite of funding options available to your business.

Together, our staff and you can determine the size and scope of your project so that we can suggest the optimal funding option for your company’s requirements. There is always a solution available for your next project, from short-term borrowing through bridging and auction finance, property development mortgage facilities, and joint venture financing.

Finance for property development explained

The method for utilising property development financing will be heavily influenced by the particular form of funding you select. You will collaborate with the lender for property development finance to determine how much funding is available if your company needs a property development loan.

A third-party valuation report will normally be part of the initial phase. This will make it easier to calculate the property’s present value before it is renovated, the cost of construction, and the gross development value (GDV) when the renovations are finished.

Remember that property development finance rates frequently include additional fees and charges. Property development finance lenders normally lend between 65% and 100% of the build cost.

Let’s talk rates

You must be able to make a sizeable upfront deposit and have experience establishing projects of a similar nature to be eligible for the best property development finance rates.

When you borrow more money, you may typically get better rates on property development loans since lenders prefer projects that are lower risk. Rates for development financing typically range from 0.43% to 5% annually.

Funds are typically delivered in phases, with the initial release typically used to either buy the site or pay off any debt currently owed on it (where it is already owned).

The remaining monies are released gradually to pay for the building after the site has been secured and the initial money has been distributed. The lender will compare your advancement to the information you provided during the application process on each release. You should adhere as strictly as you can to your work schedule to minimise problems, and you should notify the lender as soon as possible if there are any changes.

Let's talk terms

Most loans for property construction are typically used for 12 to 36 months. However, the type of endeavour being funded will determine the precise duration of this short-term development solution.

What is the time frame?

Your application will typically be finished in about 6 weeks. We will designate your application as urgent if your deadline is exceptionally short so that you can withdraw your funds on schedule.

When should I apply?

To account for potential delays, submit your application as early as possible. There may be delays where new information becomes available because this is sometimes complicated. In the meantime, you can wait for planning approval while our advisors organise your application.

Do I have to pay interest while the loan is outstanding?

Even though some lenders do demand that you make payments while the loan is outstanding, this is uncommon. The majority of lenders let you roll the interest up throughout the loan.

Why choose Smart Funding Solutions?​

When the loan is repaid, the interest is subsequently paid.

Some lenders will let you make monthly interest payments, although this is uncommon and can make things more difficult. To support this, the lender would require evidence of income, but in reality, it’s frequently challenging to make the payments because cash flow is frequently constrained during construction.

What are the benefits of property development finance?

Engage in bigger initiatives – This kind of loan allows you to invest much less money in a project. It’s not unusual to borrow 90% of the project’s cost while just contributing 10% of the cost. This implies that not all of your savings need to go toward the undertaking. This offers two advantages:

Your return on investment will grow as a result of property development. You can invest much less money in the project and still obtain a far higher return per pound by only slightly lowering the profit.

It’s been common practice to utilise company transactions as leverage to maximise return on investment, and this situation is no exception. Through the use of property development financing, you can make your money work considerably harder for you.

As new opportunities present themselves, you can use those pounds elsewhere

You have significantly less money invested in the project. Diversification is important since it’s never a smart idea to put all of your eggs in one basket. By funding your initiatives, you may preserve your savings

You can finish a variety of projects with the aid of property development finance, including single plots, large developments, and commercial real estate. Additionally, it can be used to pay for land purchases, renovations, and property conversions.

What are the additional advantages of property development finance, outside the range of projects that these loans might aid in facilitating?

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Take on bigger projects

The fact that this property development financing allows borrowers to access a higher amount of money is one of its most important advantages. This, therefore, provides you with the opportunity to work on tasks that you otherwise wouldn’t have been able to. If you have access to additional capital, you could be more inclined to take calculated risks on larger initiatives, which could result in significant growth for your company. Additionally, it allows you to display prospective clients with a more diverse portfolio of projects.

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Spending less

You don’t need to invest all of your savings in the project because a significant portion of the gross development value (GDV) will be covered by the property development loan. This implies that you are free to invest in other areas of your organisation or take advantage of other chances that present themselves. Giving yourself and your business more financial flexibility means you don’t have to use your own money upfront.

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Boost your ROI

You will be able to reap far better returns on your investment when you invest less in a development project and only marginally diminish the profits.

An illustration of real-world property development financing:

For £1,000,000, a client plans to purchase a plot and develop it into 12 residences with three bedrooms.

It would cost £1,800,000 to construct and is anticipated to sell for £4,600,000. The customer is a skilled developer with a substantial net worth. The finished homes will be put up for public sale.

The client wants to finance the entire cost of the build if at all possible but must borrow money for both the purchase and the build. If the overall borrowing is less than 90% of the entire cost of the project, our chosen lender will loan us 70% of the site purchase price and 100% of the construction expenditures.

The client can obtain a £2,500,000 loan by lending 70% of the acquisition price and 100% of the construction expenditures. This amount represents just under 90% of the project’s overall costs. The loan’s remaining balance would be disbursed over time, with the first £700,000 needed to complete the purchase being released immediately.

Making sure the borrowed funds adhere to the lender’s loan to gross development value (GDV) computation is the last step. In this case, the customer is permitted to borrow up to 75% of the gross development value.

In this case, the loan would satisfy the requirements of the lender, and we would be allowed to proceed with the application.

Methods for financing real estate development offered to developers

Property developers in the UK have a variety of financing options at their disposal. Despite the high upfront expenses associated with construction projects, there are fortunately several options available. The development financing you select will be based on your goals for business expansion and your present financial situation. The primary forms of financing for real estate development include:

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If you want to buy any kind of place that isn’t private residential property, you can use a commercial mortgage. Land, storage facilities, office buildings, and retail spaces can all be included. In that the expense of the purchase is spread out over time, commercial mortgages function similarly to private, residential mortgages.

We can assist you in locating the ideal development mortgage package if you’re wanting to obtain a commercial property mortgage, whether it’s for buying a commercial building or acquiring the building that you’re presently renting.

Since you have a proven track record of successful business operations, it is simpler for you to obtain a commercial mortgage if your company is already established. Lenders, however, sensibly take a greater risk when lending to newly established businesses. This is not to say that you won’t be able to find a commercial development mortgage for your new company, but you won’t have the same selection of lenders or advantageous rates.

When buying a new company, adding commercial real estate to your portfolio, or acquiring partially commercial mixed-use developments, bridging financing may be utilised. It can also be useful when bridging a cash shortfall on a development site.

A bridging loan is a kind of 12-month loan that is often used for short-term financing. It can serve as a temporary finance solution and “bridge the gap” as you work to find a long-term solution.

This long-term agreement fills the financial gap needed to obtain a business mortgage, significant real estate developments, or office space. The use of the facility must be more than 40% commercial to qualify for commercial bridging financing for property development.

In a couple of days, auction financing can be utilised to quickly secure residential, commercial, and mixed-use property. It entails the procedure of buying under market-valued properties at auctions.

You must have sufficient working money to be able to pay the deposit, which is typically 10% of the property’s buying price, when you purchase a property at auction. There is normally a 28-day timeframe after the non-refundable deposit has been paid to finalise the purchase.

We can assist you in securing the cash needed for your acquisition in advance if you are a commercial landlord or real estate developer wanting to buy commercial property through an auction house.

Similar to when you buy a home, auction financing gives you an “agreement in principle” that gives you the freedom and flexibility to make a bid for the property while knowing that the funding has been agreed upon in principle.

When seeking a return on your investment as a first-time property developer, auction financing is a terrific option to buy property. Properties up for auction are frequently under market value, making them profitable investments for some developers.

Mezzanine financing sits in the middle of equity and debt financing. Property developers can use a facility called mezzanine funding to finance a portion of the expenditures associated with their construction development projects. Additionally, it aids in lowering the amount of capital deposit required to launch a business.

Mezzanine financing is one of the riskiest types of borrowing, but it also provides some of the largest benefits to firms for buyouts, acquisitions, and financing of large projects. Typically, you receive the funding as the project work is completed. This kind of money is typically secured in addition to the primary funding line for the development project on a second charge.

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If your current portfolio includes several properties, you may want to consolidate it to obtain additional financing for the purchase of residential or commercial property. The term for this is portfolio finance. Whether you own two properties or more, if you are a professional investor or landlord, we can help you get future finance.

By spreading the risk across several properties and lowering overall costs, portfolio finance helps you maximise the possibility of your return on investment.

Commercial property can be bought using a commercial buy-to-let mortgage and then rented to another company. It may also be referred to as a commercial investment mortgage, buy-to-let mortgage, or landlord mortgage.

Regardless of whether your next property is occupied or not, we can assist you with your business buy-to-let mortgage. It can be simpler to apply if the property you want to invest in already has a commercial tenant using it because the building is already bringing in money.

A developer may, in some circumstances, be able to get all of the funding needed for the complete project through joint venture finance. All of the capital needed for the development lifecycle will be fronted by the JV investor, who will also receive a predetermined profit share from the development revenues.

The project must be able to provide a return on investment, and the developer must have substantial prior expertise with other successful development projects, among other conditions for this sort of financing.

Want to find out more or apply?

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Do you qualify?

We can help you acquire the financing you require, as we have already indicated, whether you are a first-time developer or have years of experience under your belt.

We are convinced we can discover the property development financing option that meets your demands because our portfolio of lending solutions is funded by a reputable and sizable network of UK lenders.

Depending on the lender and the product, the eligibility requirements for property development financing can change, but the following is a general summary of the requirements you can be asked to meet:

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Do you charge brokerage fees?

Brokers occasionally charge clients for their services. This is frequently referred to as an “arrangement fee” and may have a set price. If a customer is successful in obtaining funding from the lender, the lender may also pay a commission to the property development brokers.

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How can you get funding for property development?

The application process is straightforward – just fill in our short application below and one of our advisors will call you back.

Apply today

Request a call back

How does it work?

Fill in our form​

A member of the team will be in touch to collect some basic information. This helps us understand the type of funding that would best suit your business.

We find the best funding for you

We use the information you provided to source the best funding options for you and your business using our panel of over 250 lenders.

We present your options

We’ll then present you will all of the funding options available to you and give you time to decide which one you would like to proceed with.

What financing options do I have for property development?

Contact us if you’re unsure about the property development choices that would be best for your company. By figuring out the best course of action for your situation, we assist you in navigating the sea of possibilities.

We’ll ask you about the kind of development project you’re considering and then suggest the best solutions for your company. We have experience enabling a variety of property development finance to UK firms, from commercial mortgages to bridging loans.

Why choose Smart Funding Solutions?

Our finance partners are in a unique position to provide you with knowledgeable and enlightening advice and guidance because of the strong connections we have built with them over the years and their thorough understanding of the real estate and construction sectors.

Finding and getting the money our customers require is something we are enthusiastic about. We help property developers choose the ideal product for their needs by clearing up the murky world of business finance.

We can help with light refurbishments, ground-up development and equity release. There are many commercial finance brokers out there, but not all have the knowledge, expertise and lending panel we do.

We’ll match you with your ideal development funding lender, helping you secure competitive rates as we deal with a platform of commercial property development finance providers. You may be confident that you’ll find the best financing option for your company among the many funding options offered by reputable property development finance lenders with whom we partner.

Smart Funding Solutions are authorised and regulated by the financial conduct authority, FRN: 972740.

Frequently Asked Questions

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Property Development Finance refers to short-term funding that helps cover the cost of developing a property, including purchasing land, building new structures, or renovating existing buildings.

Property developers, real estate companies, construction firms, and sometimes individual investors involved in property development can apply for this type of finance.

The funds can be used for several purposes including land purchase, construction costs, renovation expenses, planning application fees, site preparation, or even marketing the finished developments.

There are various types, including residential or commercial property loans, land development loans, acquisition and development loans, construction loans, bridge loans, and more.

Consider your project’s size, your development experience, the project’s potential profitability, your repayment strategy, and a risk-assessment for potential issues such as planning permission denials or construction delays.

You’ll likely need to present a lender with a detailed project plan including cost estimates and timetables, planning permission documents, and your development track record. Some lenders may also require personal or business financial information.

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Interest rates depend on various factors, including your experience as a developer, the loan term, the project’s profitability, and market conditions. It’s best to consult directly with lenders or to use a finance broker to get a sense of average rates.

Most Property Development loans are secured against the land or property in question. If the borrowing entity is unable to repay the loan, the lender has rights over the property to recoup their loan amount.

While good credit increases chances of approval, some lenders might consider your application if you can provide substantial security, demonstrate strong project profitability, or engage a partner with healthier credit.

The UK government supports various initiatives for property development, like the ‘Homes England’ programmes. It’s advisable to explore official government websites for the latest schemes.

Each lender has their own timeline. After submitting the required documentation and receiving approval, funds can be typically accessed in a few weeks. In some cases with specialist lenders, it can be faster.

This depends on the specifics of your loan agreement. Some lenders allow early repayment without penalty, while others may charge a fee. Always clarify this aspect with your lender before finalising the loan agreement.

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